THE MAKING OF CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGES

• To survive and thrive an organization must create a competitive advantage
• Competitive advantage: is a feature of a product or service on which customers place a greater value than they do on offerings from competitors. 
• First-mover advantage: occur when a company can significantly increase its market share by being first with a new competitive advantage.

• Organizations watch their competition through environmental scanning
• the acquisition and analysis of events and trends in the environment external to an organization

FIVE FORCES MODEL

Buyer power: Its high when buyers have many choices of whom to buy but low when their choices are few or limited choices.

-To reduce :
1) Switching costs - costs that make customers reluctant to switch to another product or service.
2) Loyalty program - which reward customers based on their spending

Supplier power: Its high when buyers have few choices of whom to buy but low when their choices are many.

(best practices of IT to create competitive advantage, e.g. BB marketplace - private exchange allow a single buyer to posts it needs and then open the bidding to any supplier  who would care to bid. Reverse auction is an auction format in which increasingly lower bids).

Threat of substitute products or services 

- Its high when there are many alternatives to a product or service and low when there are few alternative from which to choose. 

Threat of new entrants 

- Its high when it is easy for new competitors to enter a market and low when there significant entry barriers to joining a market. 

- entry barriers is a product or service feature that customers have come to expert from organization to compete and survive.

Rivalry among existence competitors

·         - Its high when competition is fierce in a market and low when competition is more complacent.

The Generic Strategies 

Cost Leadership

·         - Becoming a low-cost producer in the industry allows the company to lower prices to customers.

·         - Competitors with higher costs cannot afford to compete with the low-cost leader on price. eg : econsave, giant, tesco.

Differentiation

·         - Create competitive advantage by distinguishing their products on one or more features important to their customers.

·         - Unique features or benefits may justify price differences and stimulate demand.

·         eg :  i-care by Proton, FAO, JPO (high class)

Focused Strategy

·         - Target to a niche market, concentrates on either cost leadership or differentiation. 

·         - Low cost, narrow market. eg : Jukebox.

·         - High cost, narrow market. eg : Tiffany & co.

Value creation

 

- Organization choose strategy use tools like value chain to determine the success or failure of its chosen strategy. 

- Supply chain : a chain or series of processes that adds value to product & service for customer (add value to its products and services that support a profit margin for the firm).

•